Please see the attached question. The demand function for bicycles in Holland has been estimated to beQuike2300+ 0.02M - 5Pbike,where M is income in Euros, Quike is the quantity demanded of bikes in units, and Pbike is the priceof bikes per unit. Suppose that the current price of a bike is 100 Euros and average income is 60,000Euros.=(a) What is the own price elasticity of demand for bicycles? Would a firm selling bicycles at thecurrent price increase, decrease, or not change its revenue by raising the price by 1%?(b) Are bicycles a normal or inferior good in Holland? By what percentage would demand for bicycleschange if average income decreased by 3%? Explain.

Price elasticity is defined as the responsiveness of the quantity demanded to the price…

(a) What is the own price elasticity of demand for bicycles? Would a firm selling bicycles at the current price increase, decrease, or not change its revenue by raising the price by 1%? (b) Are bicycles a normal or inferior good in Holland? By what percentage would demand for bicycles change if average income decreased by 3%? Explain.

(a) What is the own price elasticity of demand for bicycles? Would a firm selling bicycles at the current price increase, decrease, or not change its revenue by raising the price by 1%? (b) Are bicycles a normal or inferior good in Holland? By what percentage would demand for bicycles change if average income decreased by 3%? Explain.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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